Govt’s guidelines on appointment of banks’ chairpersons and directors, economists not optimistic

The government on Thursday issued guidelines on the appointment of chairpersons and directors of state-owned commercial banks, specialised banks and other financial institutions with a rule that secretaries or officers with the status of secretary will not be made chairpersons or directors at any of the entities. The government formulated the guidelines on forming boards of directors for state-owned banks and financial institutions for the first time amid a surge in defaulted loans in the banking sector.
Economists wondered that dual authority over the banking sector would prevent positive results from happening, rather the Bangladesh Bank should be empowered to oversee all the private and public banks. The Finance Division under the finance ministry issued a gazette notification on Thursday, saying that the guidelines were issued with the aim to form boards of directors for banks comprising competent and professionally skilled persons so that they could devise policy guidelines and supervise business activities of the state-owned banks and financial institutions efficiently as well as ensure good governance in bank management. According to the guidelines, approval from the prime minister will be required for the appointment and reappointment of chairpersons to the state-owned commercial banks, specialised banks and other financial institutions while approval will be required from the finance minister in appointing and reappointing directors to the institutions.
Currently, the banking sector is facing a serious governance crisis and the BB should have the power to control the sector for improvement. The volume of defaulted loans soared to Tk 134,396 crore at the end of September from Tk 125,257 crore at the end of June. Without common guidelines for both state-run and private banks and financial institutions, the current crisis in the country’s banking sector will not improve. We must say the government was not supportive to ensure good governance in the banking sector. After allowing embezzlement for a decade when the sector is near to verge, the new direction may not bring any positive change.